Retirement Strategies Group 10 Kyle Johns, Eric DePiero, Jack Mahoney, Jake Matthews, Casey Peris, Jeffrey Brennan Overview ● Initial Retirement Goals ● Knowing your Retirement Needs ● How to start Planning Retirement ● Retirement Strategies ○ Employer’s Pension Plan ○ Contributing to Employer's Retirement 401(k) ○ Basic Investment Principles ○ Individual Retirement Account ○ Social Security Benefits Initial Retirement Goals ● ● ● ● ● ● Retirement is expensive Start saving, keep saving and stick your goals Ways to begin saving: ○ Start at a small amount ○ Increase the amount you save each month Saving for retirement should be a priority Stick to the monthly/yearly goal It is never too early or too late to start saving This chart shows the amount of savings accumulated if $6,000 are saved each year and your money earned 7% annually Knowing your Retirement Goals ● ● Experts estimate that you will need 70% to 90% of your pre-retirement income Example: ○ Annual Income: $50,000 ○ Money Needed after retirement: $35K to $45K ● ● ● ● ● 3% annual retirement savings Has $100K of retirement savings at 45 Current Age: 45 Retirement Age: 67 Years Retired: 35 Retirement Strategies Employer’s Pension Plan & Social Security ● Requires employers to make contributions to a pool of funds ● Intended to fund payments to employees after the employee leaves the company ● Traditional pension plans are becoming increasingly rare in the US private sector ● Largely replaced by 401(k) Retirement Savings Plan, cheaper for the company Employer’s Pension Plan & Social Security Continued Social Security ● 2 main types: ○ Defined benefit plans and defined contribution plans ● Defined benefit: guarantees a fixed monthly ● ● ● payment (or a lump sum upon retirement) for the rest of your life ● Defined contribution: creates an investment ● ● account that grows with the employee's years of service. Credits are available to employees upon ● retirement ● ● ● Over 35 years of service Get a higher salary Do not apply for Social Security until you reach full retirement age Consider deferring Social Security until 70 Suspend Social Security payments. Please return the social insurance premiums Use social security strategies to your spouse's benefit Maximize Social Security survivor benefits Child's eligibility for social security survivor benefits Evaluate your life expectancy 401(k) ● ● ● ● ● Retirement plan offered by employers ○ Can be rolled over if you change jobs Money withdrawn from each paycheck ○ Invested in mutual funds, bonds, and stocks ○ Annual contribution limit of $20,500 in 2022 ($27,000 for age 50 or older) Employers can match funds ○ “Free money” ○ Vesting period to keep employees at a company Must wait till 59 ½ years old to withdraw money without a fee Must begin to withdraw money at 72 ½ years old Types of 401(k) Accounts Traditional: ● ● ● Upfront Tax Break Money in your account will not be taxed Once the money is withdrawn it will finally be taxed as income Roth: ● ● ● Contributions made with after tax dollars Money in your account will not be taxed IRS takes nothing out when money is withdrawn since it was taxed before investing Basic Investment Principles How you save can be just as important as how much you save! 1. Establish a timeline ○ 2. Inflation ○ 3. 4. Savings could be less valuable in the future Understand how your savings or pension plan is invested ○ Learn about plan’s investment options ○ Consider potential tax implications Build a diversified portfolio ○ 5. Analyze investment potential Reduces risk and improves return Investment mix may change over time ○ Age, goals, and financial circumstances Individual Retirement Account - - - An IRA is a retirement account you open individually and fund on your own, similar to a 401k but opened and managed through a financial institution instead of through your employer Usually has an annual contribution limit, an income requirement, and a withdrawal fee if you are under 60 years old Can Invest in both a 401k and an IRA to maximize investment Individual Retirement Account Types Types of IRAs: - No taxes when putting the money in, taxed at ordinary rate when taken out - Roth - - Simplified employee pension (SEP) - Traditional - - - Money put in is taxed, not taxed when taken out Rollover - Moves money already put into an employer sponsored retirement plan into a new account without compromising the tax free status and without withdrawal fees - - Works same as a traditional IRA made for self employed people and small business owners. Small business employers can set up SEPs for their employees but the employees cannot contribute to it on their own Employees can deduct their contributions on behalf of employees and it is taxed as income Simplified incentive match for employees (SIMPLE) - Same as SEP but it allows for the employee to make contributions as well Employers must contribute Low employee contribution maximum compared to other IRAs Asset Allocation and Risks Conservative Asset Allocation: ● ● ● Less stocks, more bonds and cash Prioritize the preservation of capital Less likely for portfolio to take a dip or soar in large amounts Aggressive Asset Allocation: ● ● ● ● Heavily invested, less cash and bonds Prioritize pursuing above-average portfolio appreciation over time High return expectations Can tolerate fluctuations in value of their investments Thank you! Any Questions? References https://www.teacherpensions.org/blog/which-states-have-best-and-worst-teacher-retirement-plans https://www.investopedia.com/terms/p/pensionplan.asp#:~:text=A%20pension%20plan%20is%20an,in%20the%20U.S.%20private%20section. https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/top-10-ways-to-prepare-for-retirement.pdf https://www.nerdwallet.com/article/investing/retirement-planning-an-introduction https://www.investor.gov/additional-resources/retirement-toolkit/self-directed-plans-individual-retirement-accounts-iras https://smartasset.com/investing/asset-allocation-calculator https://www.nerdwallet.com/article/investing/what-is-a-401k#:~:text=A%20401(k)%20is%20a,a%20list%20of%20available%20offerings). https://www.forbes.com/advisor/retirement/what-is-401k/ https://money.usnews.com/money/retirement/slideshows/10-social-security-claiming-strategies-that-work?slide=15 https://www.fortunebuilders.com/retirement-investment-strategies/